Ruling on Dealing with Currencies in the FOREX System and Paying Fees for Delaying the Deal. 2 (Corrected copy).

Continuation of the rulings in Dealing in Currencies in the FOREX System and Paying Fees for Delaying the Deal.

1- Dealing in bonds, which comes under the heading of riba which is haraam. This was stated in a resolution of the Islamic Fiqh Council in Jeddah, no. 60, in its sixth session.

2- Dealing indiscriminately in company shares. The fourth statement of the Islamic Fiqh Council of the Muslim World League in its fourteenth session in 1415AH, stated that it is haraam to deal in the shares of companies whose main purposes are haraam, or some of their dealings involve riba.

3- Selling currencies is usually done without the hand to hand exchange which makes them not permissible according to shari’ah.

4- Dealing in options and futures. A resolution of the Islamic Fiqh Council in Jeddah no. (63), in its sixth session, stated that optional contracts are not permissible according to shari’ah, because the object of dealing in these contracts is not money or services or a financial obligation which can be refunded or replaced . The same applies to futures and trading in indexes.

5- In some cases the agent sells things which he does not own, and selling what one does not own is forbidden in shari’ah.

Fourthly: This transaction involves economic harm to the parties involved, especially the customer (investor), and to the economy of the society in general, because it is based on borrowing to excess and taking risks. Such matters usually involve in cheating, misleading people, rumors, hoarding, artificial inflation of prices and rapid and strong fluctuation of prices, with the aim of getting rich quickly and acquiring the savings of others in unlawful ways. Hence it comes under the heading of consuming people’s wealth unlawfully, in addition to diverting wealth in society from real, fruitful economic activity to this type of risk that has no economic advantage, and it may lead to severe economic turmoil that will cause great loss and harm in the society.

The Council advises financial institutions to follow the ways of finance that are prescribed in shari’ah that do not involve riba and the like, and do not have harmful economic effects on their customers or on the economy in general, like shari’ah partnerships and the like. And Allah is the Source of strength.

May Allah send blessings and peace upon our Prophet Muhammad and all his family and companions. End quote from Majallat al-Majma’ al-Fiqh al-Islami, issue no. 22, p. 229.